Issue #002

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President Trump announced on Saturday that a memorandum of understanding (MOU) to formally end active hostilities between US and Iran has been “largely negotiated”, with final details expected to be announced “shortly”. The framework centers on reopening the Strait of Hormuz, ending competing naval blockades and extending the fragile Pakistan-brokered ceasefire. The proposed one-page agreement would reportedly allow toll-free passage for ships, enable Iran to resume oil exports with some sanctions relief, and provide a 30-60 day window for deeper negotiations on Iran’s nuclear program, regional proxies and “other issues”. Iranian officials confirmed progress towards a framework deal and narrowed gaps on some points but pushed back on key US demands. Tehran has denied agreeing to hand over its enriched uranium stockpiles in the initial MOU, calling it a potential deal-breaker, and indicated the nuclear file would be addressed in a later phase. Iranian sources described some of Trump’s characterizations of the strait reopening as “inconsistent with reality”, while stressing the need for full lifting of the US blockade and initial sanctions easements. 

The tone of news reports has changed, and it appears there is momentum towards the execution of an MOU. The US focus re: the MOU looks to be the opening of the Strait, and if reports are true, Iran appears to be open to it, provided the blockade is lifted to enable them to export oil again and sanctions are eased to some degree. It’s a good initial step, but warrants a step back to analyze the overall picture and core issues fundamental to the dispute.

The US core demand is a firm commitment from Iran not to develop nuclear weapons. In practice this translates to two specific asks: severe limits on Iran’s ability to enrich uranium going forward, plus surrender of its existing HEU stockpile, which the IAEA estimated at roughly 408kg. Additionally, the US is looking for a full reopening of the Strait without Iranian tolls or control assertions; phased, performance-based sanctions relief tied to nuclear and behavioral concessions, curbs on Iranian proxies (i.e. Hezbollah), and US forces to remain in the region.

The Iranian side has set a “very firm red line” on nuclear enrichment - it is described as non-negotiable by Iranian Officials. Former US Assistant Secretary of State Mark Kimmitt noted that Iran will insist at minimum on its right to enrich at 3.67%, which is permitted under the NPT. Iran wants sanctions relief and asset unfreezing upfront, not conditionally, a decoupling of nuclear talks from ending the war, a tolling system in place in the Strait of Hormuz, US forces withdrawal from the Middle East and protection for regional allies/proxies.

The fundamental gap is sequencing and scope. The US wants Iran to make binding nuclear concessions before the ceasefire becomes permanent and before sanctions lift. Iran wants to end the active war first, get economic relief, and negotiate nuclear terms separately from a position of less duress. The emerging two-phase framework - Hormuz first, nuclear terms in a 30-60 days follow-on window - is essentially an attempt to split the difference, but the key details (future enrichment of uranium, disposal of current stockpiles, sanctions timing) remain unresolved. Similar moments of apparent convergence collapsed into resumed strikes in both 2025 and early 2026.

The Variance’s pipeline run for this week identified two markets where the Numinous aggregated forecasts consider the above tensions as reason to be more skeptical than public markets of progress towards peace and executed deals between the two nations in the near future. 

Polymarket odds for a US x Iran peace deal by May 31, 2026 are currently at 34%. The Numinous forecast sees only a 5% chance that such a deal is reached within the next week. The resolution criteria for the market provides support for such a low forecasted probability. As per Polymarket, a permanent peace deal refers to any agreement which explicitly indicates that military hostilities between the United States and Iran have ended or will permanently cease, or uses equivalent language clearly signal a lasting end to military hostilities between the two countries. Agreements that are explicitly temporary or which do not include a definitive agreement to end military hostilities on a lasting basis (i.e. a temporary extension of a ceasefire) will not qualify. A qualifying agreement will be considered to have been established if either of the following conditions are met: (a) the US and Iran each sign or formally adopt a written agreement (i.e. a treaty or multi-point agreement) which meets the above criteria; or (b) both governments provide clear public confirmation that a qualifying agreement has been definitively established. Negotiations, statements of progress or other statements which do not constitute a definitive announcement will not count.

A conditional MOU that essentially extends the ceasefire, and stipulates a conditional peace agreement upon alignment on fundamental nuclear issues within 60 days, does not qualify as a permanent peace deal. The US has been firm that it wants Iran to concede on nuclear before agreeing to a permanent end to hostilities. Iran has been clear they won’t do so. Without such a concession, the likelihood that the US explicitly agrees to a permanent end to hostilities in any potential MOU appears to be low. The 29% divergence on a market resolving in 7 days is notable.

Our second notable divergence is regarding a nuclear deal. Polymarket odds for a US-Iran nuclear deal by June 30th are sitting at 39.5%. The Numinous aggregate forecast provides for a 22.1% likelihood of such market resolving to yes. All evidence points to a very low likelihood of Iran agreeing to the US demands regarding the Iranian nuclear program. The primary risk for this market is its resolution criteria. Polymarket establishes that the market will resolve to yes if an official agreement over Iranian nuclear research and/or nuclear weapon development, defined as a publicly announced mutual agreement, is reached. The primary resolution sources will be an official announcement by the US and/or the Islamic Republic of Iran, however an overwhelming consensus of credible reporting confirming an agreement has been reached will also qualify. 

The criteria is loose. An agreed upon MOU, stating that the nuclear program will be discussed within 60 days, could technically qualify. The 17.4% divergence is actionable solely based on the current state of the situation, but the market criteria adds considerable risk. Traders seeking to take a position should keep sizing limited.

The Variance is for informational purposes only and does not constitute financial advice. Prediction markets involve risk.